How to turn social grant queues into lines of credit

Business

How to turn social grant queues into lines of credit

Looking beyond its Sassa bid, Net1 now wants to to sell products to social grant recipients, including credit, insurance, electricity and airtime

Nick Hedley

Net1 wants to convince at least five million social grants recipients to use its other financial services products by the end of 2019, says CEO Herman Kotze.
The New York- and Johannesburg-listed company said on Friday it was “looking forward to being released” from its social grants contract in September.
Kotze said that while Net1 had initially submitted a bid for the SA Social Security Agency’s (Sassa) tender for the payment of grants at pay points for five years from September, the tender process had been placed on ice and the company would consider pulling its bid.
“We do not know when or if the tender process will resume, but we are unlikely to continue with our participation if there are reputational, legal or financial risks that may result in a repeat of the events we’ve had to endure over the past six years.”
The end of its social grants contract would allow Net1 to focus on its “financial inclusion” products, including transactional services, credit facilities, insurance and prepaid products such as electricity and airtime.“We believe our total addressable market, including those of our Finbond and Cell C associates, is approximately 10 to 15 million South Africans, and [average revenue per user] on each transactional account should exceed R25 per month,” Kotze said.
The group aimed to net five million of those potential customers over the next 12 to 18 months, Kotze said.
By reaching that target, the financial inclusion business would probably “more than offset the loss of earnings” from the Sassa contract, which did not permit Net1 to sell other products to grant beneficiaries.
Once it was free of its social grants obligations, Net1 would redeploy the 2,000 staff focused on the contract, along with related infrastructure including ATMs and point-of-sale distribution.“Obviously, we understand that we won’t be able to convince all 10.8 million grant recipients that they should convert to a Net1 product or an EPE [EasyPay Everywhere] card, but we certainly hope that we’ll be able to convince a significant portion of them, and we certainly don’t need to convert the full base for us to maintain our profitability levels.”
Net1 said on Friday revenues in the third quarter ended March rose 10% from a year before to $163-million, while “fundamental” net income more than doubled to $53.8-million, thanks in part to a fair value adjustment related to its Cell C investment.
The company bought 15% of Cell C as part of the mobile operator’s recapitalisation deal in 2017.
“Cell C has made tremendous strides post its recapitalisation, with meaningful advancements of new products and gains in market share, revenue and profitability over the past six months,” Kotze said.
Cell C’s management team expected the mobile operator to maintain its growth trajectory before its listing “some time in early 2020”, Kotze said.
– BusinessLIVE

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